What percentage is the premature tax penalty for IRA distributions taken before age 59 and a half?

The premature tax penalty for IRA distributions taken before age 59 and a half is indeed 10%. This penalty is intended to discourage individuals from withdrawing funds from their retirement accounts too early, as these funds are intended for retirement savings. The IRS imposes this penalty in addition to any regular income tax that may be owed on the distribution.

Understanding the rationale behind the 10% penalty helps clarify the importance of maintaining retirement savings until the designated age. This penalty serves as a deterrent against early withdrawals, thereby promoting better financial security in retirement.

In terms of IRA rules, certain exceptions to this penalty exist, such as for first-time home purchases, qualified education expenses, or in cases of disability. However, unless one of these exceptions applies, the standard penalty remains 10% for early distributions.